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What is the difference between a gross sale and a net sale?

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2011-03-31 18:00:00
2011-03-31 18:00:00

Gross sales mean what you are charged as the overall total of your bill and net is all other deductions subtracted with what ever balance is left being your net.

Gross sales is defined to be the total invoice value of sales, before deducting customers' discounts, returns, or allowances.

Net Sales The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any discounts allowed. The sales number reported on a company's financial statements is a net sales number, reflecting these deductions.

More information from our contributors:

  • For easier understanding, gross sales is what is accounted for as sales and net sales is what is received on account of the transaction.
Taxes; gross sale indicate total amount received before any applicable tax is taken out. Net sale is the total of gross sale minus taxes, before tax payments, royalties, etc. You pay your income tax based on gross.
  • The difference between gross sales and net sales can come from two sources.
1. Sales returns

2. Customer discounts or allowances

In accounting, the difference between gross sales and net sales can be made up of more than one factor. Gross sales revenues is all the sales revenues that have been earned by a firm during a given time period. The items that are netted out of, or deducted from, gross sales in order to arrive at net sales can be different in different industries. For example, in the book publishing industry the two items mentioned above would be deducted from gross sales to get to net sales. In the magazine publishing industry, there would be an additional deduction for advertising agency commissions.

In general, however, "gross sales" reduced by the sum of :[(1) the dollar amount of refunds for items bought and then returned by customers and (2) the dollar amount of purchase discounts taken by customers] equals "net sales".

  • Gross sale is the sale that needs some amount to be deducted from it. And net amount is final sale that is in actual figure after deducting all other things like allowances etc.
  • I might suggest that an example would help. e.g. if you sell your house for £300,000, that would be your gross sale. But if you then deduct the cost of selling it (like estate agents fees) of say £30,000 then you get £270,000 which would be your net sale.
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